(Adds finance minister comments)
By Bruno Federowski
SAO PAULO, March 15 Moody's Investors Service on
Wednesday revised upward the ratings outlook for Brazil's
sovereign rating to stable from negative, saying Latin America's
largest economy was poised to exit its deepest recession on
In a statement, Moody's Vice President Samar Maziad said a
stabler macroeconomic outlook is likely to bolster the
government's reform agenda, supporting Brazil's Ba2 rating.
Concerns over potential spillovers from fiscal woes at
state-controlled oil company Petróleo Brasileiro SA
and at state governments have also abated, he added.
President Michel Temer said in statement that the outlook
change was recognition by Moody's of his government's "efforts
to recover credibility in the Brazilian economy, reduce
inflation and restore growth."
Finance Minister Henrique Meirelles said Moody's move
reflected improved fundamentals in an economy that is beginning
to turn around, the approval of a cap on federal spending and
the advance of reforms of the pension system and labor laws.
Some analysts have been turning slightly more optimistic
about Brazil's economic prospects amid fickle signs of a rebound
as Temer advances with structural reforms.
Still, many remain cautious due to corruption investigations
ensnaring senior members of the administration and a
larger-than-expected contraction in the economy at the end of
Front-month Brazilian real future contracts extended
gains following Moody's decision. Spot markets for the currency
and stocks were closed at the time.
Moody's last cut Brazil's sovereign debt in February 2016,
downgrading it by two notches into junk territory as former
President Dilma Rousseff struggled to shore up public finances.
Now, the agency said it could upgrade it for the first time
since 2011 if structural reforms, including a revamp of the
country's costly pension system, boost economic growth or lower
Following the ouster of his leftist predecessor last year,
Temer spearheaded a campaign to balance Brazil's budget,
amending the constitution to limit growth of government spending
for two decades.
A sovereign ratings upgrade will also hinge on signs of
commitment to the spending ceiling after a highly uncertain 2018
presidential election, which Temer has pledged to abstain from,
On the other hand, threats to the "implementation of fiscal
reforms and compliance with the spending cap -- particularly
delays in passing social security reform -- would put negative
pressure on the rating," Maziad wrote.
Brazil is rated BB with a negative outlook by rival agencies
Standard & Poor's and Fitch Ratings.
(Reporting by Bruno Federowski; Editing by Daniel Flynn and